Manufacturing's sunshine gives vendors a glow

Faint signs of an IT spending lift are emerging from the Australian manufacturing sector. Powered along by robust domestic consumer spending and a near-maniacal housing market, some manufacturing companies appear to be in a situation which sees them with some cash to reinvest in their businesses and aged or nearly redundant ERP and supply chain management systems.

At Insulation Solutions, maker of fibreglass wool bats and blankets, IS manager Andrew McDonald is considering the possibilities of life beyond his decade-old AS/400 system.

"With the housing market being strong we have a little bit of cash. There's a capital proposal to upgrade our ERP system, which has approval in principle. [The funding] is not fully committed."

He said the decision to upgrade probably has as much to do with the fact that the system is quite old and needs upgrading, as well as the hardware.

"IBM is not supporting the OS any more and we are aware of that. It's just the cycle of things," McDonald told Computerworld.

Yet despite a willingness to spend a little, McDonald is hardly hoping for any miracles from his new system, no matter which vendor supplies it. Keeping the basic operational functions robust and in working order with a few interface luxuries will suffice, he said.

"The core manufacturing software is not a whole lot different. It's just a bit faster and a bit neater and functionally a little bit better. Our improvements would be incremental not massive. But we would get an ability to interface with SCM systems, e-commerce or other third-party stuff that's out there in the marketplace," he said.

Predictably, such sentiment from the grass roots of industry has some enterprise vendors conspicuously salivating at the prospect that manufacturing companies will start to either implement or refresh their systems. A Global Manufacturing Report from SSA Global Technologies (SSA) claims IT spend for 25 per cent of its Australian and New Zealand manufacturing clients "surged" over the last year to levels of up to 10 per cent and rosily predicts the spree to continue at levels of around 5 per cent.

Given that manufacturing sentiment has been one of the most heavily surveyed areas of Australian industry for the last 35 years, it is a brave call for any vendor to push out such statistics against a veritable mountain of banking and industry data.

Nonetheless SSA exploded with enthusiasm when Computerworld naively expressed an interest, mustering two regional marketing managers and a requisite (PR) flak all onto the phone at once (making it impossible to differentiate who was saying what). All three stood by their survey, which is the first of its kind, does not break down respondents by industry sector and is not seasonally adjusted. Further surveys of manufacturers are planned for the future, the three explained.

Andrew McDonald is unswayed by vendor surveys, saying that such things needed to be taken "with a grain of salt". The figures that matter to him "come through quite clearly from the [Australian Bureau of Statistics]. You can extrapolate off that and come in fairly close," he said in reference to predicting demand.

Meanwhile, Maryland-based SCM behemoth Manugistics has dispatched expat Aussie Tim Moylan from Switzerland to fill the seat of Australian managing director, a post that Computerworld understands has been vacant for about 10 months. Moylan said his company was "cautiously optimistic" about Australian manufacturing IT spend and that the housing boom held a "limited shelf life". Manugistics' renewed interest in Australia was driven by clients looking to "expand their footprint", Moylan said, adding that "people are doing ROI in-house; they are not going to the big five [accountancy firms]".

At Westpac Economics, chief economist for Australia and manufacturing analysis veteran Nigel Stapledon, said manufacturers are generally upping their spend here, although he was not aware of any data that would support a surge in IT spending by manufacturers. His prognosis for the future, especially the housing bubble, which is currently driving manufacturing, was less than rosy.

"This is not necessarily sustainable; you would hope it would cool off, but developers are very keen to meet demand from investors. There will be a few tears when it all ends just like the Nasdaq bubble," Stapledon said.

True to form, manufacturers are busy making hay while the sun still shines and vendors can but hope.

Neither Gartner or Meta Group had current statistics available for the Australian manufacturing vertical.

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More about Australian Bureau of StatisticsGartnerIBM AustraliaManugisticsMeta GroupSSASSA Global TechnologiesWestpacWestpac

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